2008 (10) TMI 194 - AT - Central Excise

Payment of Interest on Late Payment of duty utilizing Cenvat Credit - Rule 3(4) of Cenvat Credit Rules, 2002 relating to utilization of credit does not refer to payment of interest from Cenvat credit account. In such situation, credit cannot be utilized for payment of interest as it is not one of the specified purposes under the rule. Interest can be paid in cash or through PLA only.

Summary

Issues:
- Utilization of Cenvat credit for payment of interest
- Interpretation of Rule 3(4) of Cenvat Credit Rules, 2004

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai revolves around the limited issue of whether the appellants were justified in using Cenvat credit for the payment of interest amounting to Rs. 31,904. The Revenue, in its appeal, argued that Rule 3(4) of the Cenvat Credit Rules, 2004, does not permit the utilization of Cenvat credit for payment of interest. The Commissioner had upheld the payment through Cenvat credit, but the Revenue contended that interest payment should have been made in cash or through PLA. The Tribunal noted the absence of specific provisions in Rule 3(4) allowing the use of credit for interest payment, leading to the conclusion that such payment can only be made through cash or PLA.

Regarding the interpretation of Rule 3(4) of the Cenvat Credit Rules, 2004, the Tribunal emphasized that the rule does not mention payment of interest as one of the specified purposes for utilizing Cenvat credit. Citing a previous decision, the Tribunal highlighted that interest payment falls outside the scope of permissible uses of Cenvat credit as outlined in the rule. Consequently, the Tribunal set aside the Commissioner's decision upholding the payment of interest through Cenvat credit and directed that such payments should be made through PLA or cash. The appeal by the Revenue was allowed based on the interpretation of the rule and the precedent cited.

In conclusion, the judgment clarifies the limitations on utilizing Cenvat credit for interest payments under Rule 3(4) of the Cenvat Credit Rules, 2004. It underscores the necessity of adhering to the specified purposes for utilizing Cenvat credit and establishes that interest payments must be made through cash or PLA, not through Cenvat credit accounts.